Investec Most at Risk From First Strut Debt Default After Murder

By Jaco Visser and Renee Bonorchis -
Jul 30, 2013

Investec Plc (INVP)’s money manager and
Sanlam Ltd. (SLM) have the most at risk in a looming bond default of
at least 925 million rand ($94 million) after the liquidation of
First Strut RF Ltd., a South African engineering company.

Investec Asset Management invested 435 million rand in a
First Strut note through a company called Bacarac Trading 142
(Pty) Ltd., according to court documents filed in Pretoria on
July 16 by Leslie Matuson and John Louw, who were appointed as
business rescue practitioners. Sanlam Capital Markets purchased
263 million rand, Fairtree Capital (Pty) Ltd. took 131 million
rand of the notes, Prudential Portfolio Managers bought 51
million rand, Rand Merchant Bank invested 50 million rand and
Stanlib Asset Management acquired 22 million rand.

First Strut’s liquidation came after the murder of Chairman
Jeff Wiggill last month in Soweto, southwest of Johannesburg.
Wiggill’s shooting was a contract killing, the Johannesburg-based Star reported last week, citing the bail application of
one of the men arrested for his killing. First Strut, which
supplied the transport, mining and power industries, was placed
in provisional liquidation on July 16.

Investec Asset Management, which manages 40 billion rand in
corporate debt, said the First Strut bonds were part of a
dedicated high-yield institutional credit strategy. “Clients
can still expect a positive return for the year ahead,” the
Cape Town-based money manager said in an e-mailed reply to
questions today.

‘Provided For’

FirstRand, owner of South Africa’s second-largest banking
group which includes Rand Merchant Bank, loaned the engineering
company 200 million rand and invested 50 million rand in the
bond, Sam Moss, investor relations director of Johannesburg-based FirstRand, said in an e-mailed response to questions
today.

The money invested by Fairtree Capital “was held in
several credit portfolios, has been fully provided for, and
within the mandates given by the underlying investors,” Paul
Crawford, a portfolio manager at the Cape Town-based company,
said by phone today. “The portfolios remain ahead of their
performance targets.”

First Strut has 925 million rand of floating-rate notes
outstanding, which RMB sold for the company, according to data
compiled by Bloomberg.